Jones Town Pension Fund

F736 Assignment 1:

Avenue Case Study 1

Jones Town Pension Fund

EXECUTIVE SUMMARY

The Jones Town Pension fund is a mature defined pension plan for municipal employees that has a small cap value portfolio with a local investment firm, Sunrise Capital Advisors. While preparing for an Investment Commission meeting with Sunrise Capital, Jones Town employee Jack Armstrong, CFA, noticed some alarming issues that needed to be corrected as soon as possible.

Armstrong became aware of a potentially illegal issue when he noticed payments from Sunrise Capital’s employees were being made to his current boss. He knows that CFA Standard I-A (Knowledge of the Law) and I-B (Objectivity and Independence) are in question. During Armstrong’s analysis he noticed that there was a variance between the small cap investment performance number from Sunrise Capital and a custodian bank. It is not a violation to have different estimates and analysis as the custodian bank; however, Sunrise Capital’s President and CEO, Roger Green did not provide Jones Town with appropriate evidence which violates CFA Standard III-D (Performance Presentation).

Lastly, Sunrise has veered away from Jones Town’s mandate of investing in small cap value equity and has invested in high growth stocks. CFA Standard III (Suitability) requires an advisor to ensure that investments align with the client’s investment needs. In addition, Sunrise restructured its management which directly affected Jones Town but were not informed violating Standard V-B (Communication with clients and prospective clients).  

Within the report, how these issues will be corrected, is detailed with specific steps and any future violations moderated by specified new policy statements.

The first issue that can be noted is the payments from Sunrise Capital Advisors to the election campaigns of local politicians (specifically, the Treasurer of Jones Town Pension Fund - Brenda Dahl).  It is illegal for officers of firms doing business...